Our COO Tom Gordon was no newbie when he began co-creating Causam eXchange in 2014. Working under the radar for years, he and the early team built on decades of founding and leading prior technology companies to create a market ahead of its time.
While Tom is not the kind of guy to dance on table tops at a party (or is he?), nor grab the microphone and broadcast his hacking skills, this interview gives us the chance to get into his IT wizardry and vision for the future.
So, let’s dive in…
Causam eXchange is complex, building on an ethereum blockchain to revolutionize how electricity is bought and sold. When I look over your shoulder when you’re working on your laptop, I want to find a glass of wine to soothe my worries of ineptitude. So, how do you summarize your work in a few sentences?
Over the past 30 years, I’ve been very fortunate to have worked with many talented people and to have had the opportunity to work in industry transformations and disruptive technologies.
I’ve had the opportunity to work on oil and gas industry deregulation, the addition of competitive local exchange (CLEC) and mobile networks in the telecommunications industry, and now with deregulation in the electric power industry.
There are major patterns that exist in these industry transformations, and having those experiences enables me to focus on priorities in the face of significant uncertainty and a mountain of to-do’s.
In my career, I have gravitated to solving problems that can change the world for the better. When I work on those kind of problems, I get to meet people who feel the same way, and that makes all the 7-day-a-week job commitments worth while.
Having served as a leader and innovator at prior companies focused on hotel reservations, mobile gaming, and B2B transactions, how do you see Causam eXchange building on those past innovations, and why is now the right time to go to market?
A common theme across industries over the past 30 years has been using software technology to make their markets more transparent and efficient by disintermediating non-value add intermediaries. The electric energy industry is extremely inefficient with monopolies and brokers that control data and markets.
There have historically been two impediments to change in the electric power industry:
- Regulations that create monopolies or oligopolies
- The lack of control and transactive systems at the distribution level of the grid
Changes in regulations over the last few years started the industry transformation, and Causam eXchange’s EnergyNet platform helps with the necessary business systems to facilitate this transformation to a network where buyers and sellers can more freely choose how, when, and where to transact.
The timing is good for growth in the distributed grid because the cost of solar generation is close to parity with diesel and natural gas generation, and in the next couple of years, the cost of batteries will be feasible for commercial use at scale.
Everybody is salivating over blockchain these days. So, for Causam eXchange, how does this holy grail of technology buzzwords fit into your broader solution?
There are three core elements to blockchain: Peer-to-peer (P2P) database, encryption, and consensus.
The new innovation with blockchain is the consensus model and its use to ensure the integrity of the P2P database. We are using blockchain in our EnergyNet platform for three primary activities:
- A payment option – To allow market participants to pay or be paid with cryptocurrency or fiat currencies
- Measurement and verification – To transparently record data used in financial transactions
- Contract execution – To use smart contracts as deterministic execution between parties
You’ve been front and center in discussions with retail electric providers who need Causam eXchange. Why do they see your technology as a solution to the problems that keep them awake, sweating in their bed at night?
Retail electric providers (REPs) are struggling to grow their customer base and retain residential and commercial businesses once they’ve spent the money to acquire them.
For the most part, REPs procure their supply from large wholesalers with annual Power Purchase Agreements (PPAs), and on the spot market when their forecast doesn’t match their existing contracted supply. They collect money by showing up as a line item in a traditional utility bill.
What we bring is the ability for REPs to form contracts or options on contracts with distributed energy resources on the supply side, and the ability to directly contract and financially settle with their customers. These capabilities can increase their margins and make their customers significantly more interested in sticking with them as full-service providers of innovative and customizable electric solutions.
Some market experts suggest that there are dozens of competitors in the energy blockchain world. Why do you think this is hogwash? (Yep, let’s reminder readers that we’re in the South.)
First, the market for our services is much larger than we will be able to address for a few years, which means there will be competitors that will have commercial success. And, glass half full, their success is validation of our business model.
However, their success won’t be because of the blockchain technology. It will be because of the domain expertise they show in dealing with the existing grid.
Most of the ICO (initial coin offering) startups have been thinking that the entire network of suppliers and consumers will switch to using their token as the value base of the transaction. What we will likely see is that most of those ICO tokens are not liquid enough, nor at a large enough scale, and thus may never achieve the value paid by the investors during the offering.
Secondly, we are one of the largest patent holders in this space, and many of these competitors will hopefully become licensees of ours.
Third, our model is to acquire companies for growth, so those competitors that show early traction are potential future business partners.
One of our coolest clients is a real estate developer building a net positive energy building campus in Raleigh, North Carolina. Tell us a bit about that project, and why Causam eXchange was essential to making those cutting-edge green buildings a reality.
This project has already gotten some local press attention as potentially the first positive energy campus of this size in the Southeast.
The building is currently under construction, and is being created with state-of-the-art materials and systems to minimize the energy needs of the tenants. The site will also have a roughly 1 MW solar array, plus a geothermal system and several other cool ways to generate electric power in the building, parking lots, and common spaces without generating air pollution or greenhouse gas emissions.
This building is the first of five campus buildings being built over the next seven years or so.
We are deploying Causam eXchange’s EnergyNet platform in these buildings to provide measurement and verification of the electrical grid use relative to onsite clean energy use, smart contracts with all the energy providers and tenants, and the financial settlements between all the parties.
Additionally, we are using incentive systems to help tenants lower their energy bills by making them be aware of their usage for different types of power and providing tangible actions they can take.
This is an extremely exciting project and will be an iconic destination in North Carolina’s capital city of Raleigh for years to come.
A lot of people are worried about cybersecurity on our ancient power grid. Can Causam eXchange serve as a Valium or iron shield to help address some of those concerns?
Cybersecurity in the power grid is a huge concern for our nation.
Unfortunately, our power grid was built at a time before terrorism and the proliferation of major weapon systems. It is very difficult to build security into the grid after-the-fact, without spending trillions of dollars over decades.
A lot of the deregulation in the power industry is geared towards creating a distributed grid that acts more like the Internet in the sense that if you wipe out one node, the entire network doesn’t fail.
With EnergyNet, we designed the system to be NERC CIP Version 5 compliant, which in layman’s terms means that our software can be used within the existing power grid for critical components of generation, transmission, and distribution. Other blockchain companies may not be going through this extra effort because they are seeking to create their own private energy trading platforms.
IoT, or the Internet of Things, is another popular buzzword these days. Does Causam eXchange fit into this vision of the future? Or is it a reality today? Why should building owners or retail electric providers care?
The Internet of Things is having significant impacts in a number of industries, with Intel projecting 200 billion connected devices by 2020.
In the electric energy industry, the Internet of Things will have its biggest impact in modernizing metering in a number of ways:
- Competition for devices will lower revenue grade metrology cost (i.e., for measurements)
- Lower costs will allow for real-time data collection (much better than 15 minute smart meters today)
- Greater ease of installation
The good news is that the technology for IoT for metering has matured because of the cost optimization evolving in data centers. Unfortunately, there isn’t a lot of standardization across vendors.
We’ve spent significant effort to normalize the data from these devices. Additionally, many of these devices are programmable, so we’ve been able to raise the bar for securing the transactions and verifying the devices the IoT meters are monitoring.
In closing, what other thoughts about Causam eXchange merit a mention here. And hurry, Friday happy hour is calling our name…
I’ll note three things, in no particular order…
- In any industry transformation, identifying where the future revenue is going to come from is critical. Over the last 75 years in the electric power industry, utilities were the main source of revenue for vendors. As we move forward, the value chain in the industry will minimize the “wires” vendors in favor of distributed power suppliers and consumer aggregators.
- The first step we are taking in the industry’s transformation is enabling new suppliers of renewable and clean energy to get directly paid by their consumers. The second step is connecting suppliers with demand-side aggregators. The third step is providing a transparent marketplace where suppliers and demand-side aggregators can find each other and form dynamic contracts with performance-based financial settlement.
- Finally, our EnergyNet platform makes it possible for commercial businesses and microgrids to generate revenue from their investments versus just cutting costs. This is a whole new level of value creation, and ultimately, we want to be helping asset owners become virtual power plants.